‘Outsourcing protection advice: Should you, or shouldn’t you?’ by Paula Steele published in Protection Reporter

In the ever-evolving landscape of protection advice in the UK, the decision to outsource protection advice is becoming an increasingly relevant topic for financial advisers and firms.

Protection products, such as Life Insurance, Critical Illness Cover (CIC), and Income Protection (IP), are essential components of financial security, but delivering these services requires time, expertise, and a level of customer engagement that may stretch the resources of smaller advisory firms.

As businesses seek ways to streamline operations and enhance profitability, outsourcing protection advice has emerged as a potential solution – but it’s not without its complexities.

One of the key advantages of outsourcing is the ability to tap into specialist knowledge and expertise. Protection advice is highly technical, involving a deep understanding of different products & underwriting processes. By outsourcing to a third-party expert, you can ensure that customers receive tailored advice from professionals who are specifically trained in protection planning.

“This can improve the quality of advice and potentially reduce the risk of errors or omissions that could lead to compliance issues.”

Outsourcing can significantly reduce operational costs. Instead of hiring and training full-time advisers, firms can work with an external provider, paying only for the services they need. This offers flexibility and allows businesses to scale up or down depending on demand. For smaller firms or those just starting out, outsourcing is a cost-effective route to providing a broad range of protection products without the overhead of recruiting and maintaining an in-house team.

Advisers often find themselves stretched between providing protection advice and managing cases. Outsourcing protection advice can free up valuable time and resources, allowing advisers to focus on their core competencies. This can enhance the overall efficiency of the business and improve customer satisfaction.

Outsourcing to a dedicated protection advice firm can often lead to faster response times and quicker turnarounds. These third-party providers are likely to have streamlined processes and dedicated resources for handling protection cases, avoiding delays that might have arisen from an in-house team juggling multiple roles.

On the other hand, when advice is outsourced, the relationship between the adviser and customer can become more impersonal. Customers may feel dismissed when handed off to someone who isn’t fully aware of their circumstances or unique needs.

“In my experience, protection advice is a deeply personal matter, and customers often prefer to receive it from an adviser that they trust.”

While outsourcing can offer access to expertise, the quality of advice can vary significantly depending on the provider. Inconsistent advice or insufficiently thorough processes could harm your reputation, leading to customer dissatisfaction or even regulatory issues.

The protection advice sector is highly regulated, and advisers must ensure that all advice is compliant with the Financial Conduct Authority’s (FCA) rules & guidelines. Outsourcing introduces an additional layer of risk, as the third-party provider must also adhere to these regulations.

“If the outsourced provider falls short of compliance standards, it could reflect poorly on your firm, even if you’re not directly involved in the advice process.”

Firms must take extra care to vet their outsourcing partners to ensure they are fully FCA-compliant and capable of handling the complexities of the regulatory landscape.

Outsourcing protection advice can offer significant advantages in terms of expertise, cost efficiency, and operational flexibility. However, it also carries risks, particularly around maintaining customer relationships and ensuring consistent, compliant service.

Ultimately, outsourcing protection advice can be a strategic way to enhance your service offering without overburdening your in-house team.

Author: Paula Steele, Director at John Lamb Hill Oldridge

Article published in Protection Reporter, November 2024